NY Wine - Release: 3-8-2004

Washington, D.C.–The Institute for Justice today filed a petition with the U.S. Supreme Court asking it to review a recent 2nd U.S. Circuit Court of Appeals ruling that upheld a ban on direct interstate shipment of wine to consumers in the nation’s second-biggest wine market. The case raises issues of Internet commerce, free trade among the states, and regulations that hamper small businesses and the consumers they seek to serve.

Because the 2nd Circuit ruling conflicts with a 6th Circuit ruling striking down Michigan’s direct wine shipment ban, which is also pending before the High Court, the odds that the Court will review one or both cases are higher than usual.

“This case presents a clash between economic protectionism and consumer freedom,” declared Clint Bolick, vice president of the Institute for Justice and lead counsel in the New York case. “It pits the State and a quartet of multi-billion dollar oligopolists against family-owned wineries and the consumers who want to buy their wines.”

The Institute for Justice, a Washington, D.C.-based public interest law firm that challenges barriers to entrepreneurship, represents Juanita Swedenburg, a Virginia winemaker; David Lucas, who owns a small California winery; and New York consumers who cannot purchase their wines because of the ban.

The Institute’s clients say the ban violates the Commerce Clause and the Privileges and Immunities Clause of the federal Constitution, which protect freedom of commerce and enterprise. The State and the liquor distributors argue that the State of New York has plenary authority under the 21st Amendment to regulate alcohol.

In November 2002, federal district court judge Richard Berman struck down New York’s ban. Last month, the 2nd Circuit overturned that decision.

Appeals courts are split over the issue: the 4th (North Carolina), 5th (Texas), and 6th (Michigan) Circuits have struck down direct shipment bans; the 2nd (New York) and 7th (Indiana) have upheld them; and the 11th (Florida) overturned a district court decision upholding a ban and remanded the case for further consideration.

Currently, 24 states ban direct interstate wine shipments while 26 states allow them. The latter number has grown in recent years due to successful lawsuits and legislative reform. This year, New York Gov. George Pataki has urged legislation to allow direct interstate shipping. The effort has attracted bipartisan support. Several states, including New York, permit direct shipping by in-state wineries, but forbid it by wineries in other states.

A 2003 study by the Federal Trade Commission found that state direct shipment bans constitute a serious barrier to Internet commerce, and that states’ concerns about underage access and tax collection can be satisfied through less-burdensome means.

The Institute for Justice petition urges the Court to settle the split of authority among the appellate courts, which is a common basis for U.S. Supreme Court review.

“Only the Supreme Court can ensure that freedom of enterprise and the Internet’s great potential to satisfy consumer desires will receive the full constitutional protection they deserve,” Bolick stated.